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Damage limitation

Jeremy Beecham on the impact on claimants of the government’s new personal injury legislation

The government’s new Claims Liability Bill covers two discrete areas of personal injury law. Firstly, claims for damages for whiplash injuries. Secondly, the calculation of compensation by way of lump sums for financial loss in serious injury claims.

The former is effectively a response to exaggerated claims – something not confined, as the media, insurance industry and government would have us believe to claimants and advisers. The small number of insurance companies operating in the market constantly report that the number of claims for whiplash injuries is rising, with a consequential impact on premiums. A degree of scepticism about this is justified.

In 2010, Lord Young of Graffham declared “the problem of the compensation culture prevalent in society today is … one of perception rather than reality”. Road traffic accident claims have fallen by 14% since 2013, and 10% in the past year. Relative to the number of vehicles on the road, claims are at their lowest in a decade.

The government’s proposals will impose a tariff system for compensation ranging from £235 for pain and discomfort for up to 3 months, to £3910 for 18-24 months. That is respectively 76% and 49% less than the current guidelines prescribed by the Judicial College. The new system would be entirely based on the time scale, and not on the severity of the pain and suffering endured.

The House of Lords Delegated Powers and Regulatory Reform Committee poses two central questions on this: “What is meant by whiplash injury?” and “By how much are awards of damages to be reduced?” The answers they have divined are that “Whiplash injury means whatever the Lord Chancellor says it will mean. Adding: “Given the complex physical and psychological components of whiplash injury, it is not satisfactory that these matters should be left to regulations” – a refrain all too frequently heard by Peers in relation to secondary legislation. And that the reduction in awards of damages “will be whatever the Lord Chancellor says it will be”.

Crucially, the Committee advises that the judiciary, with its long experience of personal injury claims, should determine the provision for damages. Failing that, the responsibility should be undertaken by independent medical experts. And with the emphatic conclusion that “it would be an inappropriate delegation of power for damages for whiplash injury to be set in a tariff made by Ministerial regulations rather than on the face of the Bill.”.

All of this echoes repeated expressions of concern about the use, and abuse, of delegated legislation – with the limited opportunities to persuade governments to think again and respond to concerns expressed in either the Commons or Lords.

There is real concern about the pending increase in the small claims level which, apart from the £5000 limit chosen for whiplash claims, will now be set at £2000 by the Lord Chancellor – below which costs are not awarded. This is a significantly higher figure than would be the case if the existing level were to be increased to reflect inflation.

It’s also unclear what the government will do to control the activities of Claims Management Companies. A parasitic growth in our justice system, these seem able to pursue potential clients via cold calling then seek disproportionately large fees out of the modest damages recovered

The second part of the Bill deals with ‘the discount rate’ used to calculate the level of damages awarded in the most serious cases, and having regard to investment returns and inflation. This relates to cases of very serious injuries, with life changing consequences which might last for a long time. The government’s proposals could adversely affect many claimants, with the rate again to be determined by Ministers rather than the judiciary – an unsatisfactory process.

Today’s Lords Second Reading of the Bill takes place at the same time the Compensation Recovery Unit has published details of a significant fall in the number of motor cases with settlements – down to their lowest level since 2011. The government are leaning over backwards to protect the insurance industry with scant regard to the interests of the victims of negligent drivers.

Lord Jeremy Beecham is Shadow Justice Minister in the House of Lords. He tweets @jeremybeecham